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market crash: More than new Covid stain, market falling under own weight: Sandip Sabharwal

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“I believe that over the next few weeks we will get the markets coming down to reasonable levels,” says Sandip Sabharwal, analyst, asksandipsabharwal.com.

For a market which is already shaky, in the last five days we have had FII selling of about Rs 20,000 crore. Even the whiff of a new Covid-19 variant is not going to spell good news for Indian markets.
In my view the news flow comes about and corrections happen and that is perfectly fine, but normally markets fall under their own weight and when they rise they rise when they become very light.

In March 2000, the market started rising when Covid was moving up very rapidly. So, it is all a question of how the market is positioned. The market is heavy. There is too much frenzy and euphoria and then reasons come about for the correction. Similar variant detections happened previously also. News flows have come and only around 100 cases have been detected at this stage all over the world and in the context of the overall infection or daily spread, that is miniscule. So let us hope this blows over because previously also, the South African variant did not spread around the world and hopefully this one would not either.



But markets need to correct to get over the excesses and that is what they will do and I believe that over the next few weeks we will get the markets coming down to reasonable levels and in the next one month we will also know whether we need to be really concerned about this new Covid variant or not. Things are in a flux but it goes without saying that in the valuation context, investors and traders need to be cautious.

How do you make sense of ’s price action yesterday?
As per the news flow which is in public domain, it did not make any sense for the stock to move up so much, especially given the fact that over the weekend, a major deal fell off for 35% of its total assets. The total assets of Reliance recedes around Rs 14 lakh crore and that Rs 14 lakh crore oil to chemical (O2C) is around 35% and so that will be Rs 5 lakh crore approximately. Those are legacy assets whose value is deteriorating significantly on a continuous basis and will approach very low levels over the next 10-15 years.

The entire story was that it gets monetised and that money gets invested into new generation businesses. That did not happen and some irrelevant news flow led to the stock moving up. My guess is it will be tough for Reliance to sustain and it will give back some of the gains and could also move lower if the investments come in the supposed new generation businesses where Reliance has to dilute stake on the growth businesses as it did last year in the Jio platforms and retail then it is not an ideal scenario for the minority shareholders.

Is it a good time to be a contra buyer in IL&FS? The stock has consolidated, QIP could be coming, nobody likes it, very few own it.
Overall, the housing finance business is not as great a business to be in as it was historically when banks were not competing so aggressively and other NBFCs were not aggressively into housing finance. Now everyone is into housing finance and banks and high rated NBFCs have a better positioning out there because housing loan rates are at the lowest level of the total loan disbursements which happened across the board in any personal loan segment or with a collateral.

In my view, pure housing finance NBFCs because they do not have a deposit franchise they will find it very difficult to compete vis-à-vis banks and the larger NBFCs. I would think that comparing a stock to historical prices makes no sense. People need to take it as it comes and I really have not evaluated it from an investment perspective. But overall directionally, for pure housing finance companies I am not very bullish.

At the current juncture are markets pricing in all the recovery trades or earnings for next two quarters?
I would think that they are factoring in for the next two quarters at least. The overall market itself is factoring in many companies for the next 10 years also and for many of the unlock trades for the next two to four quarters. Now the performance needs to come and the numbers need to back up the kind of stock moves which we have seen. In that context, for many of the unlock trades, the results of the next two quarters will become critical.

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Karnataka govt issues advisory for educational institutions amid spike in Covid cases. Details here

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In view of concerns over recent Covid-19 clusters in Mysuru, Dharwad, and Bengaluru, Karnataka government on Sunday decided to implement a slew of stringent precautionary measures in educational institutions.

Karnataka government in an advisory following recent Covid-19 clusters in Mysuru, Dharwad, and Bengaluru said that all social and cultural events, conferences, seminars, academic events, etc. in educational institutions may be postponed for two months. 

The official statement issued by the Karnataka government informed that, “all students in medical and paramedical and other such educational institutions should be screened daily for symptoms of Covid-19. And the symptomatic should be tested and treated as per the guidelines already issued.” 

It said, “all students in medical and paramedical and other such educational institutions should be screened daily for symptoms of Covid-19. And the symptomatic should be tested and treated as per the guidelines already issued. 

All social and cultural events in educational institutions may be postponed for two months, it said.  

The official statement further informed, “conferences, seminars, academic events, etc. in educational institutions, wherever possible may be postponed. Alternatively, it could be conducted in hybrid mode, i.e. with minimal physical attendance and with more persons attending through virtual mode.”  

This comes a day after Karnataka Chief Minister Basavaraj Bommai chaired a meeting on Saturday in which instructions were given to increase vigil on the state’s borders. The Chief Minister gave directions for “strict monitoring at bordering districts of Kerala and Maharashtra and undertaking tight recce on National Highways”.

“It has been decided to impose a temporary ban on cultural programmes in schools and colleges, make the second dose of vaccination compulsory for those working in government offices, malls, hotels, cinema halls, zoos, swimming pools and libraries,” said Karnataka Revenue Minister, R Ashok briefing the media persons about the decisions taken at the meeting.

According to the statement, students in hostels who have got negative RTPCR test reports would have to get the RTPCR test done again on the 7th day after the first report.

“More intense testing for students in medical and nursing colleges will be compulsory. There will be a temporary ban on cultural programmes in schools and colleges,” it added.

 

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Pakistan round-up: Rs 40bn irregularities in Imran’s Covid package, & more

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Pakistan’s total debt and liabilities have crossed Rs 50.5 trillion, an addition of Rs 20.7 trillion under the current government alone.

In June 2018, every Pakistani owed Rs 144,000, which increased to Rs 235,000 by September 2021, an additional burden of Rs 91,000 or 63% during PTI’s tenure.

The State Bank of Pakistan released the debt figures till September 2021, a day after Prime Minister Imran Khan described the increasing debt as a “national security issue”.

Pakistan will soon get $3 billion as loan from Saudi Arabia as the cabinet has approved an agreement to keep the amount in the country’s central bank.

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Tensions run high as Swiss vote on Covid vaccine certificate law | Switzerland

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People in Switzerland are voting on a Covid vaccine certificate law, after a campaign characterised by unprecedented levels of hostility in a country renowned for its culture of compromise.

As in much of Europe, Switzerland has seen growing anger over restrictions aimed at reining in the pandemic, and pressure to get vaccinated.

But in a country where there are referendums every few months in a climate of civility and measured debate, the soaring tensions around the vote have come as a shock. Police increased security around several politicians who have faced a flood of insults and death threats.

The polls close at noon (11am GMT) on Sunday, with the results expected within the following hours as the vast majority vote by mail before polling day.

Voters are deciding whether to approve amendments to the Covid law which, among other things, provide the legal basis for a Covid certificate that says if a person has been vaccinated or has recovered from the virus.

Opponents say the certificate, which has been required since September for access to restaurants and other indoor spaces and activities, is creating an “apartheid” system.

Final opinion polls showed about two-thirds of the voters supported the Covid laws.

Police blocked the square in front of the seat of government and parliament in Bern on Sunday, anticipating protests after the result.

Observers have warned that the vote could exacerbate tensions, and even spark a violent backlash among the anti-vaccine crowd if results do not go in their favour.

During the campaign, fences were erected around the buildings to protect them during anti-vax demonstrations.

They were often led by the “Freiheitstrychler” or “Freedom ringers” – men dressed in white shirts embroidered with edelweiss flowers and with two large cowbells suspended from a yoke resting on their shoulders.

Some of the demonstrations have led to violent clashes with police, who have used rubber bullets and teargas to rein in the crowds.

The referendum comes as the new Covid-19 variant Omicron, first detected in southern Africa and classified as a variant of concern, has rattled countries and markets around the world.

It is the second time in less than six months that the Swiss have been called on to vote on the government’s response to the pandemic. In June, 60% of voters approved prolonging national measures.

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